Vandel Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 6,600 units are planned to be sold in April. The variable selling and administrative expense is $9.70 per unit. The budgeted fixed selling and administrative expense is $127,380 per month, which includes depreciation of $8,580 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the April selling and administrative expense budget should be:
A)$191,400
B)$118,800
C)$64,020
D)$182,820

Question

Quizplus · Accepted Answer

The total selling and administrative expense budget can be calculated as follows:

Variable expenses = 6,600 units x $9.70 per unit = $63,960
Fixed expenses = $127,380

Total expenses = $63,960 + $127,380 = $191,340

However, $8,580 of the fixed expenses is depreciation and is a non-cash expense. Therefore, the cash disbursements for selling and administrative expenses would be:

Total expenses - depreciation = $191,340 - $8,580 = $182,760

Therefore, the best choice is D, which is closest to the calculated cash disbursements.